UN's regulatory riptide poses threat to international trade

By
Murray L. Weidenbaum, Special to The Christian Science Monitor, Murray L. Weidenbaum served as the first chairman of President Reagan's Council of Economic Advisers. He is now director of the Center for the Study of American Business at Washington University in St. Louis. /
January 5, 1984

The United Nations is in a growth phase in its attempts to control private enterprise. We are witnessing a proliferation of studies, guidelines, directives, and reports, all focused on involving the UN in what historically have been domestic affairs of member countries.

Some UN regulatory actions are broad, covering the whole spectrum of business activity. Others are directed at specific products, such as pharmaceuticals. Some are in the development stage, such as the regulation of technology transfer. Others are binding treaties, as in the case of the Moon Treaty. The form in which UN regulatory activities currently exist often indicates the next step in the international regulatory process. In effect, yesterday's studies lead to today's ''voluntary guidelines,'' which, in turn, become the basis for the treaties of tomorrow.

An example is the provision that multinational or transnational corporations should ''avoid practices, products, or services which cause detrimental effects on cultural patterns and sociocultural objectives as determined by government.'' Where is the historical perspective of the authors of the code? Over the centuries, civilization has been advanced by the transnational flow of science, art, music, literature - and culture and commerce. Moreover, should the UN encourage member governments to set ''sociocultural objectives'' and require private enterprise to follow the ''cultural patterns'' set by government? This is not a traditional function of regulation in a free society. It is a mechanism used by totalitarian rulers to enforce their power.

Multinational corporations are given special attention - and penalized - in the UN's proposals. Is it because they are the major alternative to government operation of economic development? UN regulators seem to forget that the corporation has been a key to the successful development of Taiwan, South Korea, Singapore, and Japan.

The most sweeping UN regulation of private enterprise is the Law of the Sea Treaty, adopted in April 1982. The United States is not a signatory. To receive approval for sea mining, a private firm must agree to transfer any technology it uses to the Enterprise (which is a UN agency) or to developing countries for ''fair and reasonable commercial terms.'' Also, the company must provide, for each site mined, information on a second seabed site to be reserved for the Enterprise or developing countries. Private firms are thus forced to subsidize their competition.

Companies involved in marketing of products face a variety of international regulatory measures. The best known is the Infant Formula Code, adopted by the UN in 1981. This code calls for a wide variety of restrictions on the marketing and distribution of breast-milk substitutes, applying not only to advertising but also to the compensation of marketing personnel. The Infant Formula Code is not the exception but the entering wedge for broader UN regulation, including a proposed code on the marketing of pharmaceuticals.

The UN is also considering a sweeping consumer-protection code that would create new obstacles to international trade. Grand goals are set forth in vague language. One general principle in the draft guidelines raises grave concerns: the right to economic safety from offenses or malpractices which deny consumers optimum benefit within their economic resources.

Taken at face value, this is gibberish. But given the frequency with which people in communist countries are thrown in jail for ''economic offenses,'' this provision is potentially dangerous. Will Big Brother determine what are ''offenses and malpractices'' and the point at which consumers have derived ''optimum benefit'' from resources?

Here's another provision: Business practices affecting the processing and distribution of food products and especially the marketing of highly refined and expensive food products should be regulated in order to ensure that such practices do not conflict with consumers' interests or government aims in the area of food policy.

Who is going to judge the ''conflict'' between consumers' interests and business practices? In market economies, consumers protect their interests by not buying the product.

The UN's Educational, Scientific, and Cultural Organization is seriously studying restrictions on news gathering by ''multinational'' communications agencies, developing a code of ethics for journalists, censoring the release to the Western press of information about developing countries, and developing guidelines ''with respect to advertising content and the values and attitudes it fosters.'' (Last week, the Reagan administration notified UNESCO that it intends to withdraw from the organization by 1985 unless changes are made. The US objects to what it perceives as the agency's anti-Western bias, efforts to limit press freedom, and mismanagement.)

By creating new trade barriers at a time when many of the developing nations are hard pressed to earn the foreign exchange to service their existing debts, international regulation would be counterproductive to the needs of those countries. To compound the problem, the advocates of this new array of regulation have not learned the lessons from the shortcomings of existing regulation by member states. Study after study has demonstrated that such rules often do little to advance their stated social objectives.